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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
J.B.PARDIWALA, BHARGAV D. KARIA, JJ.
Cosmo Films Limited - Appellant
Versus
Union Of India & 3 Others - Respondents
R/Special Civil Application No. 15833 of 2018
Decided on : 20-10-2020
Constitution of India, 1950 - Article 226 - CGST Rules - Rule 96 - Customs Act, 1962 - Section 39 Gujarat Goods and Services Tax Act, 2017 - Central Goods and Service Tax Act, 2017 - Business of manufacturing and sale of flexible packaging films – License - Exemption for AA license holders - Foreign Trade Policy - Petitioner raised in this petition is therefore taken care of - However, it is also made clear that Notification is required to be made applicable and not prior thereto from the inception of the Rule 96(10) of the CGST Act -Petitioner is a public limited company engaged in the business of manufacturing and sale of flexible packaging films - Petition is filed through its Director and Authorized person - Petitioner is the holder of Advance Authorization Licenses granted in terms of Foreign Trade Policy, issued and amended from time to time - Petitioner has obtained AA Licenses and imports goods without payment of import duty in terms of Notification Customs, It is the case of the petitioner that, with effect - Central Goods and Service Tax Act, 2017 and Gujarat Goods and Services Tax Act, 2017 are enacted for indirect tax on goods and services. The provisions with respect to export of goods or services are contained under the Integrated Goods and Services Tax Act, 2017.
Finding of the Court :
Petitioner raised in this petition is therefore taken care of - However, it is also made clear that Notification is required to be made applicable w.e.f. and not prior thereto from the inception of the Rule 96(10) of the CGST Act. Therefore, in effect Notification shall remain in force as amended by the Notification by substituting sub-rule (10) of Rule 96 of CGST Rules, in consonance with sub-section (3) of Section 54 of the CGST Act and Section 16 of the IGST Act. The Notification is therefore held to be effective - Rule is made absolute to the aforesaid extent, with no order as to costs.
Result : Ordered Accordingly
Key Points: - The court discusses the validity and retrospective applicability of Notification No. 54/2018 substituting sub-rule (10) of Rule 96 CGST Rules (!) (!) (!) . - It analyzes the relationship of Rule 96(10) with AA Licenses, deemed exports, and the rebate/refund mechanisms under IGST Act and CGST Act (!) (!) . - It cites the legislative and constitutional framework for rule making, including Section 164 CGST Act and Article 14/19(1)(g) of the Constitution, in validating or challenging the rule changes (!) (!) (!) . - The judgment references prior amendments and the Supreme Court/High Court precedents on transitional credits and neutrality during GST regime change (!) (!) . - It notes the explanatory amendment (Explanation) added by later notification (16/2020-C.T.) to clarify eligibility concerning input tax credits and AA benefits (!) . - The petition seeks to quash amendments restricting rebate for AA license importers and stay demands regarding retroactive operation (!) (!) . - It emphasizes that zero-rated exports and refunds are governed by IGST Section 16, CGST Section 54, and Rule 96(10)" subsidiarily" (!) (!) . - The case involves interpretation of eligibility for rebate/refund where inputs have AA benefits or deemed export benefits (!) (!) . - It hinges on whether retrospective amendments can penalize exporters who claimed benefits during interim periods prior to enforcement (!) (!) . - It discusses the GST Council's role and notification validity under Section 164 when making rules (!) .
JUDGMENT :
BHARGAV D. KARIA, J.
1. Rule returnable forthwith. The Learned Standing Counsel Mr. Nirzar Desai waived service of notice of rule on behalf of the respondent nos. 1, 3 and 4.
2. Having regard to the controversy raised in this petition in narrow compass, with the consent of the learned advocates for the respective parties, the same is taken up for final hearing.
3. By this petition, under Article 226 of the Constitution of India, the petitioner has prayed for the following reliefs:
(b) this Hon'ble Court may be pleased to issue a writ, order or direction staying any demand against Rebate benefits availed by the Petitioner due to retrospective operation of the impugned Notifications on Rule 96(10) of the CGST and the GGST Rules;
(c) this such further and other reliefs be granted as this Hon'ble Court may deem fit and proper.”
4. The short facts of the case are as under:
4.1. The petitioner is a public limited company engaged in the business of manufacturing and sale of flexible packaging films. The petition is filed through its Director and Authorized person Mr. Anil Kumar Jain.
4.2. The petitioner is the holder of Advance Authorization Licenses (for short ‘the AA License’) granted in terms of the Foreign Trade Policy, issued and amended from time to time.
4.3. The petitioner has obtained AA Licenses and imports goods without payment of import duty in terms of Notification No. 79/2017-Customs, dated 13th October 2017. It is the case of the petitioner that, with effect from 1st July 2017, the Central Goods and Service Tax Act, 2017 (for short ‘the CGST Act’) and the Gujarat Goods and Services Tax Act, 2017 (for short ‘the GGST Act’) are enacted for indirect tax on goods and services. The provisions with respect to export of goods or services are contained under the Integrated Goods and Services Tax Act, 2017 (for short ‘the IGST Act’). Section 16 of the IGST Act deals with export of goods and services and provides benefits against the export of goods or services which can be claimed through either, (a) supply without payment of IGST and claim refund of unutilized input tax credit at the end of the period (“Refund”) and (b) Supply on payment of IGST and claim refund of such IGST paid (“Rebate”).
4.4. For the purpose of procedure for granting refund of IGST on the goods and services exported out of India, Rule 96 of the Central Goods and Services Tax Rules, 2017 (for short ‘the CGST Rules’) provides the mechanism, as per the procedure prescribed under Section 54 of the CGST Act and GGST Act. Sub-rule (10) of Rule 96 of the CGST Rules was introduced vide para-3 of Notification No. 54/2018-Central Tax, dated 9th October 2018 issued by the respondent no.1-the Ministry of Finance w.e.f. 23rd October 2017 and corresponding provisions were also introduced in the GGST Rules by the respondent no.2-State of Gujarat.
4.5. Sub-rule (10) of Rule 96 of CGST Rules was inserted by the Central Goods and Service Tax (3rd Amendment) Rules, 2017 w.e.f. 1st July 2017. Sub-rule (10) provides for the exemption for AA license holders importing goods from levy of custom duties and IGST.
4.6. The petitioner was entitled to import raw materials without payment of IGST under AA Licenses and pay IGST on exports and claim Rebate (Refund) of the IGST so paid on exports. The petitioner has received benefits o
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